Sunday, 07 June 2020


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In China Moody's sees a threat of default

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Local authorities in China are facing record debt this year. Moody's experts warn the Chinese government on a default imminent. The deadline for payment of 127,000 yuan (21,000 million) in bonds, which have been amassed since the 2000s, expires in the second half of this year. Regional officials actively used informal banking services, establish their own small banks and use them to invest in real estate and infrastructure projects, "which often do not turn out to be profitable", according to the Bloomberg Agency. Only the city of Ordos in the northern province of Inner Mongolia, has a debt of 240,000 yuan (40,000 million dollars), while total debt of local governments stood at 30 billion yuan, or 3.3 billion dollars. To prevent a financial catastrophe, it is very likely that the Chinese Government will allow the sale of bonds to certain companies. Last week the Government of Li Keqiang announced the measures it will take to stimulate the economy, which showed a slowdown to 7.5% in the last quarter. These include removing the minimum rate for bank loans, raising the threshold for foreign investment in capital markets and a draft free trade zone in Shanghai. The government has approved tax breaks for small businesses and promised to accelerate the construction of railways to boost the economy.  

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